The cost to the Crown of fighting claims by victims of abuse in state care is finally revealed before a Royal Commission. Aaron Smale calculates where most of the money went

Published in Newsroom

As Deep Throat would say, follow the money. There were likely to be a few people gagging as they had to cough up figures to present to the Royal Commission of Inquiry into state abuse.

I had been told by the Ministry of Social Development and Crown Law back in 2017 that it was too complicated to work out how much they’d spent defending the state against claims of abuse. They had told a curious Jacinda Ardern the same thing when she was a backbencher in Opposition. It turns out they can work it out and it’s now obvious why they might not have wanted to try. The figures are damning.

In evidence given before the Royal Commission today, Simon MacPherson, from MSD’s senior leadership team, gave a breakdown of what the Crown has spent. What is particularly revealing is not so much the dollar figure but who got what.

MacPherson said: “From June 2007 to June 2019, the Ministry has spent approximately $76,922,972 on the resolution of Historic Claims. About 39 percent of that has gone to claimants as settlement payments and 7 percent has gone to Legal Aid. The remainder has been spent on operational costs and external legal fees (including Crown Law fees).”

There’s a cluster of interesting information in there, but two innocuous words stand out – resolution and remainder.

To say that MSD has spent money on the “resolution” of historic claims is a complete misnomer. They’ve spent copious amounts of money trying to evade responsibility. A breakdown of the percentages shows this. Related to that is the use of the word “remainder”. This “remainder” is actually the biggest percentage, while that percentage is never given a number. And that large chunk of money doesn’t go to a “resolution” but to Crown employees trying to block and deny a just resolution.

There’s a saying that there’s lies, damned lies and statistics. These numbers being put before the Royal Commission aren’t lies, but they don’t tell the whole truth either. Or at least the whole story. Let’s fill in a few gaps.

First, MSD has received 3932 claims of abuse. Of those, 1858 have been resolved. That abuse was carried out by state employees and has caused severe trauma that has lifelong implications for the victims. Those payouts (which are accompanied by a letter denying legal liability) total around $30 million. So “resolved” means that claimants get an average of around $16,000 as compensation for abuse that includes severe violence, torture, sexual assault including rape, solitary confinement, lack of education and various other forms of ill-treatment.

From that roughly $77 million total, 7 percent has been spent on legal aid, which works out at around $5.4 million over 12 years. The law firm that would have accounted for pretty much all of that is Cooper Legal, headed by Sonja Cooper. Cooper’s work includes taking harrowing accounts of abuse from those nearly 4000 victims, conducting document research on the files which it has to wrest from MSD, writing up statements of claim, negotiating with MSD and Crown Law, taking cases to court, paying staff, office expenses, etc.

While Cooper Legal works in other areas, state abuse is the significant part of the firm’s work. It needs to be said that a large percentage of Cooper Legal’s clients have not had their claims resolved. One example is Tyrone Marks who first filed his claim in 2007 – and there are many others whose claims have languished because they refuse to accept what they regard as insulting offers that are further aggravated by the Crown’s refusal to take full responsibility.

Then there is what MacPherson calls the “remainder”, which makes it sound like leftovers when it fact it is the largest slice of the pie. Fifty-four percent of MSD’s expenditure on responding to claims of state abuse is money the Crown has spent on itself. That 54 percent amounts to $41.5 million. This is called operational costs but includes legal fees including the costs for Crown Law. Given lawyers are probably on a higher rate than standard ministry staff, it’s likely the biggest chunk of this $41.5 million has gone to lawyers. And a fewer number of them. This figure doesn’t include the millions MSD and Crown Law would have spent preparing for a test case in 2007.

It’s fair to assume that MSD/Crown Law don’t have nearly 4000 lawyers and bureaucrats dealing with these claims, or even 2000. So the amount of money government employees are getting paid versus what the actual victims of abuse are being compensated is severely out of whack. So a person who was repeatedly raped as a child while in the custody of the state may be offered, say, $20,000 as compensation, while the person writing up the response (which includes a denial of liability) might be getting paid multiple times that amount.

There’s another interesting comparison to be made in these figures. Given Cooper Legal and MSD are largely handling the same claims (some claimants deal directly with MSD), albeit from different sides of the table, there is a massive discrepancy between what Cooper Legal has cost the taxpayer and what the Crown has spent. Admin costs don’t explain the contrast. What could explain this massive imbalance – $5.4m versus $41.5m – that means the Crown was spending eight times the amount that claimants had to represent them?

What it indicates is that the Crown has gone to great expense to fight these claims, not settle them. That expense is literally more than the compensation itself. The Crown has fought these claims not because they are not credible but because it refuses to take responsibility, even where there is a mountain of evidence and even when the allegations are against known and convicted paedophiles. At one point the Crown even tried to cut off Cooper Legal’s legal aid.

If $77 million sounds like a lot of taxpayer money, consider for a moment that the National government wrote out a cheque for $1.6 billion to investors in the failed South Canterbury Finance. Quite what the decisions of investors has to do with the taxpayer has never been explained, nor why they could be so quickly “compensated” for their poor choices.

Victims of state abuse did not choose to be taken from their families or abused by state employees. And yet the state not only insults them with pitiful sums called compensation but treats them with hostility and contempt along the way. One of the starkest examples of this is the claimant Earl White (a pseudonym to protect his identity) who was involved in the test case dubbed the White Trial in 2007. The judge in that trial found he had been sexually abused on at least 13 occasions while he was at Hokio Beach School in Levin, not to mention the physical violence he experienced both there and at Epuni Boys’ Home.

Despite this, Earl White received a letter from MSD chief executive Peter Hughes (now the State Services Commissioner) reaffirming the court’s decision that MSD was not legally liable and offering an ex gratia payment of $25,000. White said in his evidence before the Royal Commission: “I felt disgusted and insulted and violated all over again. I feel I have been cheated out of a legitimate claim that was proved. The amount I was paid is a joke and insult against the repeated sexual and physical abuse the Court found happened. It is hard to reconcile when compared with the huge cost to the Crown, not only the cost of the Crown’s lawyers, but also my legal aid and the costs of the Judge and other department and court staff.”

When MSD lists the costs, it only mentions the dollars. The Crown doesn’t mention the actual human cost to victims like Earl and thousands of others. You can never put a figure on that.

By Aaron Smale
Published in Newsroom
20 Oct 2020